Corporate Accounting and Taxation: Comparative Analysis of Four Listed Companies

This report provides a comparative analysis of the capital structure and owner’s equity of four listed companies, namely Woolworths, Wesfarmers, Treasury Wine Estates Ltd, and The a2 Milk Co Ltd. It also discusses corporate regulations and accounting standard setting.

Running Head: Corporate Accounting and Taxation
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Four Listed Companies
Corporate Accounting
Corporate Accounting
System-PPP
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Running Head: CORPORATE ACCOUNTING
Executive summary
With the ramified economic changes, each and every organization needs to maintain
the transparent business for its shareholder. In this report, comparative analyses of the four
years of four companies have been taken into consideration. These all four companies have
been facing high financial leverage and cost of capital which needs to be undertaken by the
managers if they want to operate business effectively on sustainable basis. It is analyzed that
only that company which is having high profitability could have high financial leverage so
that it could take advantage of low cost of capital to strengthen the return on capital
employed.

Running Head: CORPORATE ACCOUNTING
Table of Contents
Executive summary...............................................................................................................................1
Introduction...........................................................................................................................................3
Answer to question no-1........................................................................................................................3
CORPORATE REGULATION.............................................................................................................3
Answer to question no-2........................................................................................................................4
ACCOUNTING STANDARD SETTING.......................................................................................................4
Answer to question no-3........................................................................................................................5
Owners’ Equity......................................................................................................................................5
Ordinary Share capital.......................................................................................................................6
Other Equity Instruments...................................................................................................................6
Reserves............................................................................................................................................6
Retained profits.................................................................................................................................7
Accumulated and other comprehensive income.................................................................................7
Answer to question no-4........................................................................................................................7
Comparative analysis of four companies (Woolworths, Telstra, Wesfarmers)......................................7
Comparative analysis.........................................................................................................................9
Conclusion...........................................................................................................................................10
References...........................................................................................................................................11

Running Head: CORPORATE ACCOUNTING
Introduction
Organizaiton is accompanied with the complex set of activities in which various
functions are performed. However, with the increasing complexity, managers and
accountants needs to disclose the proper details in its books of account as per the IFRS rules
and regulations so that they could make the business more transparent to stakeholders. In the
starting two questions on the corporate regulations and accounting standards have been
analyzed. After that four companies named, Woolworths, Wesfarmers, Treasury Wine Estates
Ltd and The a2 Milk Co Ltd have been assessed to evaluate their capital structure and
owner’s equity.
Answer to question no-1
CORPORATE REGULATION
With the increasing complexity, managers need to disclose the proper details in its
books of account as per the IFRS rules and regulations to keep the business more transparent
to stakeholders. The main reason of adopting the voluntary disclosure of the financial
information of company will keep the business more transparent. It is analyzed that if
company keeps its business more transparent then it will allow stakeholder to strengthen their
investment decisions for the best investment decision. If managers keep the business
reporting more transparent and follow volunteer reporting frameworks then it will result to
more informed decisions for the shareholders. It is analyzed that shareholders are the key
owners of the company who invest capital in the business functioning of Organizaiton
(Brigham, Ehrhardt, Nason, & Gessaroli, 2016). If managers establish the harmonization in
its domestic and international reporting frameworks then it will not only meet the current
legal reporting obligation but also result to sharing the key information with the stakeholders.
It is analyzed that when all the technical issued is identified than the mean work of IASB start
to make research on all the issues. It is sometime impossible for board to make research on
everything so they take help of AASB For the research Nonetheless, managers and directors
are drivers of the company who takes imperative decisions in the best interest of the
organization. They also have responsibility to share imperative information with the
stakeholders so that these shareholders could evaluate where their money have been deployed
in the business. It is further analysed that IASB does not mandate application of the IFRS
rules and regulation to be followed by the member countries. These countries are given

Running Head: CORPORATE ACCOUNTING
option to either adopt the IFRS rules or follow their own financial reporting rules till the time
they keep their business on international level. These IFRS rule and regulations have been
issued for the international organizations so that they could establish harmonization in their
reporting frameworks. Due to the complexity of the reporting frameworks, it might be hard
for the layman to interpretation of the financial data. It is analyzed that only a few entities in
the respective countries members that exceed a given threshold are authorised to
compulsorily follow the IFRS. Therefore, it is no compulsory obligation on the members’
countries to adopt these rules as it is their own choice to follow these rules and regulations.
Nonetheless, once, these rules have been adopted by particular countries then all the
companies of that country need to follow the adopted international financial reporting
standards (Baños-Caballero, García-Teruel, and Martínez-Solano, 2014
Answer to question no-2
ACCOUNTING STANDARD SETTING
With the ramified economic changes, the setting and monitoring of accounting standards for
Australia is done by Australian accounting standard board and apart from setting of standards
for the Australia organization, the board work for the international accounting standard board.
The international accounting standard board is giving two functions improving and approving
he international financial reporting standard. It work as the oversee body for managing the
work of international financial reporting standards (Baños-Caballero, García-Teruel, and
Martínez-Solano, 2014). Mangers need to follow the proper financial reporting standards
which will help him to strengthen the reporting frameworks.
The IASB function is to find out all the technical issues that are link with the IFRSs ask for
the joining and help from the different accounting standard bodies, one major of them being
the Australian accounting standard board. The AASB provides all the help to the IASB by
identify technical issues. When all the technical issued is identified than the mean work of
IASB start to make research on all the issues. It is sometime impossible for board to make
research on everything so they take help of AASB For the research. The documents prepared
include, exposure draft, invitation to the comment that are given by the board, draft
interpretations, and discussion papers that are prepared after the research is been done
(Brigham, Ehrhardt, Nason, & Gessaroli, 2016).

Running Head: CORPORATE ACCOUNTING
For preparing all the documents by the board they need certain communication with the
stakeholders. As board have to communicate on the research paper with the stakeholders so
single method for communication is not adequate. To bring the better method of
communication certain communication tools are formulated focus group, project advisory
panels and interpretation advisory panels. The other organization in Australia also sends such
document to the AASB. The IASB received all the documents, suggestion, and they format in
the form of international standards after that the IFRS are issued by IASB with the help of
AASB. This rotate continuously and the AASB help the IASB (Cassar, 2011).
All the changes that are brought by IASB in the IFRS are according to the observation in the
different countries. All the IFRS are issued so that the harmony is maintain worldwide and
there are no different standards that are followed by different countries. This will not only
strengthen the reporting frameworks but also keep the financial information to easily
understand for the investors.
The IASB do not force the countries to follow IFRS it is completely their choice to follow
these rules and regulations. Only there are few countries are force to follow IFRS and the rest
of the countries can follow it or else they can reject to follow them it is completely their
choice (Cassar, 2011). It is analyzed that each and every shareholder should be given proper
accounting information and business details which could be used by them to make the
effective investment decisions (Ehiedu, 2014).
Answer to question no-3
Owners’ Equity
Owner’s equity of the all four listed companies working in the supermarket industry
Particular Woolworths Wesfarmers A2 Milk
Company
Treasury
Wine
Estates
Ltd

Running Head: CORPORATE ACCOUNTING
Share capital Common Stock 11375 22242 142
3235
Equity
144 133 12
(7)
Retained earning 9033 1509 291
256
Accumulated and other
comprehensive income
- 57 111
8
Total stockholders' equity 19826 23941 556
3492
Ordinary Share capital
It is the part of the capital which invested by the shareholders in company. It is accompanied
with the outstanding equity share holding and other part of the equity share holders which
have been invested by the shareholders. The ordinary share capital of all these four
companies have increased drastically as they company raised capital from the investors by
issue of shares (Treasury Wine Estates Ltd., 2018). After analysing the table given above, it
is analyzed that The owner’s equity of Woolworths Company has been increased and
recorded to AUD $ 22243 million which is 12% higher as compared to last four year data. In
case of Wesfarmers, the owner’s equity has been recorded to AUD $ 4063million which is
13% higher since last three year data. The Treasury Wine Estates Ltd Plc has AUD $ 3235
million share holding and The A2 Milk Company has AUD $ 142 million share holding
which is 7% higher as compared to last four year data (Grant, 2016).
Other Equity Instruments
It is the part of the equity investment by investors in the other equity instruments. It is
analyzed that issued equity instrument is the part of the share warrants which is accompanied
with the shares papers, notes and other documents which have been issued to investors for the
particular consideration. All of these four companies do not carry any other equity
instruments in its books of account (Treasury Wine Estates Ltd, 2018).

Running Head: CORPORATE ACCOUNTING
Reserves
It is accompanied with the reserve and retained earning which reflects that company
shows the accumulation of the profit of last years. After analysing the annual report of all
these four companies, it is analyzed that all these companies do not have any reserve in their
account (Miao, Teoh, and Zhu, (2016).
Retained profits
The retained profit is accumulation of the profit of last year. It is analyzed that the
retained profit is kept in the business to strengthen the business outcomes and meeting the set
targets in determined approach. It is analyzed that Wesfarmers Company has kept AUD $
9033 million as retained profit which is 14% higher since last four year. In addition to this,
Woolworths Company has also kept AUD $ 1509 which is 12% higher and reflects the
positive indicator for future growth. In case of Treasury Wine Estates Ltd., it had AUD $ 256
million retained profit has been kept. The a2 Milk Co Ltd has increased its retained earnings
to AUD $ 291 million (Wesfarmers plc, 2018).
Accumulated and other comprehensive income
It is the income earned by company due to the other external factors such as hedge
funding, changes in the foreign exchange reserve. It is analyzed that Wesfarmers Company
has kept AUD $ 57 million Accumulated and other comprehensive income which is 11%
higher since last year (Bloomberg, 2017). In addition to this, Woolworths Company has also
kept zero Accumulated and other comprehensive income. In case of Treasury Wine Estates
Ltd, AUD $ 8 million Accumulated and other comprehensive income has been kept which is
2 % higher as compared to last four year data. The A2 Milk Company has also lower down
its retained earnings to AUD $ 291 million which is 1.5% lower since last four year. The
Accumulated and other comprehensive income have been kept highest (Weygandt, Kimmel,
and Kieso, 2015).
After analysing the equity capital and other reserve of all these companies, it is analyzed that
the shareholders capital of Wesfarmers of company is the highest as compared to other three
companies (Weygandt, Kimmel, and Kieso, 2015).

Running Head: CORPORATE ACCOUNTING
Answer to question no-4
Comparative analysis of four companies (Woolworths, Treasury Wine
Estates Ltd, Wesfarmers and A2 Milk)
The comparative analysis of capital structure of these four companies has been made
so that we could analysis which company has higher financial leverage and cost of capital. It
is analyzed that Woolworths has kept higher Accumulated and other comprehensive income
as compared to others (Wong, Lo, and Firth, 2015).
Capital structure of Wesfarmers
Fiscal year ends in June. AUD in
millions except per share data.
2014 2016 2016-
06
2017-06
Long-term debt 4215 4752 5671 4066
Total stockholders' equity 19825 20252 22949 23941
The debt to equity ratio of Wesfarmers Company has increased to 32% which is 4% lower as
compared to last year data. The main reason of increased debt to equity ratio of company is
that company has increased the equity portion in its books of account (Wesfarmers plc,
(2018). It has reflected that company has increased the equity portion but it might negatively
impact the overall cost of capital of company and may also result to negative financial impact
on the overall return on capital employed (Yahoo Finance, 2017).
Woolworths Company Cash Flow Flag INCOME STATEMEN
Fiscal year ends in June. AUD in millions except per
share data.
2014 2015 2016-
06
2017-
06
Total stockholders' equity 1574 1657 $ $

Running Head: CORPORATE ACCOUNTING
5 8 18254 19254
Long-term debt 4253 4542 $ 4542 $ 5252
The debt to equity ratio of Woolworths Company shows that it has maintained stable
financial leverage in all the two years. However, it has kept 65% debt to equity which may
result to higher financial leverage and may be negative if company does not have adequate
profit in its business. The higher debt capital in business will surely reduce the cost of capital
of Organizaiton (Yahoo Finance, 2017).
Treasury Wine Estates Ltd 2014 2015 2016-
09
2017-09
Total stockholders' equity
3,048 3,048 3,048 3,048
Total long-term debt
531 987 896 1144
The debt to equity ratio of Treasury Wine Estates Ltd has increased to 15 % which might be
negative as low profitability may increase the overall costing of the busienss. It will also
increase the overall outcomes and business efficiency in long run Treasury Wine Estates Ltd
should identify the point where it will have balanced financial leverage and cost of capital
(Yahoo Finance, 2017).
The a2 Milk Co Ltd 201
4
201
5
2016-
09
2017-
09
Total stockholders' equity
59 133 241 556
Total long-term debt 0 0 0 0

Running Head: CORPORATE ACCOUNTING
The debt to equity ratio of The A2 Milk Company shows that it has increased its equity
capital and maintained zero debts which have resulted to zero financial leverage (The A2
Milk Plc, 2017). However, The A2 Milk Company still needs to lower down its financial
leverage as it is already having more than 62 % debt capital in its capital structure.
Comparative analysis
This could be inferred that The A2 Milk Company has maintained zero financial leverage
which is very negative for the cost of capital of company. it might face issue of low return on
capital employed as compared to other companies.
Conclusion
Every company needs to manage their financial leverage and cost of equity first to its
business more sustainable and international reporting frameworks to keep business more
transparent. This could be done by setting up harmonization in reporting frameworks. The
crux of this report is that keeping the optimum capital structure is very much required for the
sustainable busienss practice. High financial leverage and high cost of capital both could be
negative for the organization in long run.

Running Head: CORPORATE ACCOUNTING
References
Baños-Caballero, S., García-Teruel, P.J. and Martínez-Solano, P., 2014. Working capital
management, corporate performance, and financial constraints. Journal of Business
Research, 67(3), pp.332-338.
Bloomberg, 2017, Financial details [online] Available from
https://www.bloomberg.com/asia, , [Accessed on 25th September 2018]
Brigham, E. F., Ehrhardt, M. C., Nason, R. R., & Gessaroli, J. (2016). Financial Managment:
Theory And Practice, Canadian Edition. Nelson Education.
Cassar, G. (2011). Discussion of the value of financial statement verification in debt
financing: Evidence from private US firms. Journal of Accounting Research, 49(2), PP. 507-
528.
Ehiedu, V.C., 2014. The impact of liquidity on profitability of some selected companies: The
financial statement analysis (FSA) approach. Research Journal of Finance and
Accounting, 5(5), pp.81-90.
Grant, R.M., 2016. Contemporary strategy analysis: Text and cases edition. Australia: John
Wiley & Sons.
The A2 Milk Company Plc, (2017) Annual Report [online] Available from
https://thea2milkcompany.com/wp-content/uploads/The-a2-Milk-2016-2017-Annual-Report-
spreads.pd., , [Accessed on 25th September 2018]
Miao, B., Teoh, S.H. and Zhu, Z., (2016) Limited attention, statement of cash flow
disclosure, and the valuation of accruals. Review of Accounting Studies, 21(2), pp.473-515.
Treasury Wine Estates Ltd, (2018) Annual Report [online] Available from
https://www.google.co.in/search?
q=Treasury+Wine+Estates+Ltd+anual+report&oq=Treasury+Wine+Estates+Ltd+anual+repo
rt&aqs=chrome..69i57j69i60l3.2757j0j7&sourceid=chrome&ie=UTF-8., ., [Accessed on 25th
September 2018]
Wesfarmers Plc, (2018) Annual Report [online] Available from
https://www.wesfarmers.com.au/docs/default-source/default-document-library/2017-annual-
report.pdf?sfvrsn., [Accessed on 25th September 2018]

Running Head: CORPORATE ACCOUNTING
Weygandt, J. J., Kimmel, P. D., and Kieso, D. E. (2015). Financial & managerial
accounting. 2nd ed, Australia: John Wiley & Sons.
Wong, R.M., Lo, A.W. and Firth, M., (2015) Managing Discretionary Accruals and Book‐
Tax Differences in Anticipation of Tax Rate Increases: Evidence from China. Journal of
International Financial Management & Accounting, 26(2), pp.188-222.
Yahoo Finance, 2017, ‘Financial details [online] Available from
https://in.finance.yahoo.com/quote/DEB.L/., [online] Available from [Accessed on 25th
September 2018]

Running Head: CORPORATE ACCOUNTING